US economy contracts 32.9% in second quarter, biggest drop since 1947

Washington The US economy suffered its sharpest downturn since at least the 1940s in the second quarter, highlighting how the pandemic has ravaged businesses across the country and left millions of Americans out of work.

Gross domestic product shrank at a 32.9 per cent annualized pace in the second quarter from the first, the most in quarterly records dating back to 1947, the US Commerce Department’s initial estimate showed.

The figures lay bare the extent of the economic devastation that resulted from the government-ordered shutdowns and stay-at-home orders designed to slow the spread of the coronavirus that abruptly brought a halt to the longest-running expansion.

While employment, spending and production have improved since reopenings picked up in May and massive federal stimulus reached Americans, a recent surge in infections has tempered the pace of the recovery.

That surge, the result of America’s failure to contain the virus, indicates that the US economy is likely to recover more slowly than places that have done a better job, such as the euro area. And the longer the pandemic lasts without a vaccine, the longer economic output will remain below pre-crisis levels, leaving permanent scars on many businesses and workers.

No joy on jobs

The number of Americans filing for unemployment benefits increased a second straight week, a sign the economic rebound is increasingly at risk with US Congress poised to potentially let supplemental $600 payments expire.

Initial claims through regular state programmes rose to 1.43 million in the week ended July 25, up 12,000 from the prior week.

There were 17 million Americans filing for ongoing benefits through those programmes in the period ended July 18, up 867,000 from the prior week – the largest increase since early May.